If a monopoly faces an inverse demand function of p = 90 – Q, has a constant marginal and average cost of 30, and can perfectly price discriminate, what is its profit? What are the consumer surplus, total surplus, and deadweight loss? How would these results change if the firm were a single-price monopoly?
Answer to relevant QuestionsHow would the answers to Q& A 10.1 and Table 10.1 change if seniors’ reservation price was $5?Spenser’s Superior Stoves advertises a one- day sale on electric stoves. The ad specifies that no phone orders are accepted and that the purchaser must transport the stove. Why does the firm include these restrictions?Are all the (identical) customers of the nonlinear price- discriminating monopoly in panel a of figure worse off than they would be if the firm set a single (uniform) price (panel b)? What if the consumers were not identical?As described in the Mini-Case “Available for a Song,” Shiller and Waldfogel (2011) estimated that if iTunes used two-part pricing charging an annual access fee and a low price per song, it would raise its profit by about ...Many retail stores offer to match or beat the price offered by a rival store. Explain why firms that belong to a cartel might make this offer.
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